N.J. may use private inspectors for Sandy money oversight

Feb. 24, 2013
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In Mississippi, state fraud officials uncovered misuse of one of the modular Katrina cottages. A women subleased her cottage to a daughter, who subleased it to a boyfriend operating a meth lab. / Mario Tama, Getty Images

Each of the Gulf Coast states created semi-permanent offices that are still keeping tabs on spending related to four of the major hurricanes that struck more than seven years ago, the most active Atlantic hurricane season in modern history.

Mississippi's state auditor used some of the state's federal recovery money to create a fraud unit still wrapping up cases sprung by Hurricane Katrina, which struck in late August 2005. Among the frauds detected was a women who subleased her modular "Katrina cottage" to a daughter, who subleased it to a boyfriend who was operating a meth lab, State Auditor Stacey Pickering said.

"You're going to be amazed at the effort and energy people put into defrauding the public, their neighbors and friends," Pickering said. "You're going to see those kinds of issues. And then you're going to see people who get held up in the process who aren't getting the aid and the assistance that they truly deserve and need."

In New Jersey, time is of the essence. With the first $1.8 billion in federal grants likely to start arriving in March, the state's transparency website is still in development, and private-sector "integrity monitors" likely to be used to expand oversight capacity haven't been approved, let alone lined up.

The prospect for controversy abounds, as evidenced by a focus on whether the state's debris-removal contract with AshBritt Inc. - perhaps the first major Sandy-recovery project - was cost effective. That, in turn, can hurt the recovery.

"They lose their faith in the government and the local community if money is wasted, and so it's imperative from an economic development standpoint that people know that they can trust their local government, their state government," Pickering said.

In announcing measures two weeks ago such a comptroller review of contracts, a transparency website and "accountability officers" to help oversee Sandy contracts, New Jersey Gov. Chris Christie said that oversight is important but that he doesn't want to slow the flow of recovery money.

"It's essential that we have the confidence of the people of New Jersey and the people of the United States in this process," he said.

Three days earlier, Christie emphasized he doesn't want oversight to overshadow recovery.

"I am results oriented as to Sandy relief," he said. "I want to put all the bodies on trying to get the money to folks on the ground so they can rebuild their homes and rebuild their businesses."

Tricky balance

The balance between accelerating recovery and preventing waste is tricky, yet important.

"This is one of those double-edged swords here," said Bryan Koon, director of Florida's Division of Emergency Management. "You want the money to go out quickly so that you can return to normalcy, restore the economic vitality of the impacted communities, get people back in their homes, businesses, restore the infrastructure, etc.

"On the other hand, if you do it too quickly without proper consideration, you can sometimes rebuild exactly the way things were and put yourself in the exact same situation for the next storm," Koon said.

New Jersey will receive billions of dollars in recovery money though the precise amount is unknown.

From the $50 billion Congress approved in late January, federal Department of Housing and Urban Development has allocated only the first $5.4 billion in Community Development Block Grant Disaster Recovery money. New Jersey will receive just less than $1.83 billion of that and hopes to use it for grants to homeowners to help them raise their homes, grants to small businesses and a marketing campaign.

Pete McAleer, a spokesman for New Jersey state Comptroller Matthew Boxer, said work is being done to get the transparency website ready to launch.

Boxer said his office is focusing its audit work on reconstruction projects and following up on past audit findings for agencies and towns receiving Sandy money to make sure problems are fixed. Integrity monitors would refer problems they detect to the comptroller, Christie said.

"We're not aware of any plans to increase employees or costs," McAleer said. "We plan to accomplish the task outlined in the executive order with our existing infrastructure. It builds on things we're already doing."

Mississippi fraud unit

Pickering said Mississippi used a portion of its Community Development Block Grant money after Katrina to create a fraud unit that, at its peak, had 18 investigators and a lawyer. It coordinated with federal investigators and worked with the U.S. Attorney to prosecute cases.

"That was probably one of the biggest things that we did," Pickering said.

To oversee Mississippi's Homeowners Assistance Program, the state contracted with a series of accounting firms to cross-reference applications to flag duplicates, attempted fraud or applicants with convictions or felonies, Pickering said.

"We actually had some individuals from Texas, Louisiana, some other states, who were applying and getting through the system," Pickering said. "By the same token, we did not want to err on holding up the funds and not helping our citizens.

"So some of the funds, you get it out the door, get it to the people," she said. "We're going to come back and hold them accountable if they defraud us. Some of it has to happen after the fact."

Florida model

Florida has a Bureau of Recovery in its state Division of Emergency Management, which at its 2007 peak had 75 staffers monitoring $4.5 billion in recovery grants. It focuses in part on advocating for Florida to secure as much federal aid as possible - and then spend it right, so it doesn't have to be returned later.

"It's a fine line between ensuring that the state gets everything coming to it but not getting too much," Koon said.

Koon and Florida recovery bureau chief Evan Rosenberg said they have had instances when a mid-level official at FEMA approved a project, only to have a supervisor or audit determine, even years later, that the item was ineligible and the money must be returned.

Document everything, Koon said.

"This is really a political decision to be made by the policy makers within the state," Rosenberg said.